The Green Door #16
May 1999

Although many may dispute it, my sanity is preventing me from becoming a billionaire. There are many examples of Internet Stock Craziness, but I've decided to narrow it down to one.

Internet Stock Craziness

It is always fascinating how much money means and doesn't mean. Recently Yahoo bought GeoCities for $4.7 billion in Yahoo stock. Amazingly, pigs didn't start flying; there were no reports of hell freezing over.

GeoCities hosts Web pages for free in exchange for the creator adding code that brings up a separate window with advertising. This extra window takes so long to open that it can easily be closed before any advertising hits your windowbrain. This window of advertising appears to be GeoCities only current or future revenue stream. Typically the content of GeoCities pages consists of stuff that couldn't find a proper Web home elsewhere.

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For $4.7 BILLION, Yahoo got a company with $18.4 million in annual revenues and $19.8 million in annual losses, which means GeoCities' expenses are 200% of their revenue. For every $1 they took in, they spent $2. This is absolutely insane. Except for computer equipment, GeoCities has NO assets; they don't even have a viable business model! GeoCities has 3.2 million people providing content. If Yahoo paid each of those folks $100 to move their pages to a Yahoo server ($100 beats free), they would have only paid $320 million and saved $4.3 billion. Of course Yahoo had to buy it, if they didn't another company would have snapped up this "jewel".

To understand how much $4.7 billion is, Ford just bought Volvo's profitable passenger car business for $6.45 billion. Assets included factories, technology and a valuable brand name. This business will add $12 billion to Ford's annual revenues and will add to Ford's bottom line immediately. Ace Ltd. is purchasing Cigna's property and casualty insurance business for $3.45 billion. This price includes a profitable 200+ year old business with global reach, real estate, a 200-year-old collection of art and artifacts, and a country club. Yahoo didn't even get a miniature golf course for their $4.7 billion.

I seem to be the only person who thinks paying $4.7 billion for an unprofitable company with $18.4 million in revenues and no tangible assets is total insanity. Other than a few comments recounting the facts of the sale, the media have completely ignored it. The stock market hasn't punished Yahoo either. We live in crazy times, where people can come up with business plans that don't work and sell them for billions. Of course I'm jealous. Common sense prevents me from pursuing idiotic business plans. I wonder if Yahoo is interested in buying a bar; I'd settle for a billion, Website and beer included. I bet Geocities didn't come with any beer.

The Green Door is a mostly monthly zine published by Scoats. E-mail: scoats at greylodge dot com.(c) Scoats 1999. All rights reserved. Most wrongs unintentional. Reproduction permitted as long as it accompanied by this entire paragraph.

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